High-Yield
We build a four-stage business cycle framework based on economic growth and capacity utilization, and then analyze historical returns for most major asset allocation decisions for each stage. Given that we are in the early recession stage (negative growth coupled and an overheated economy), our framework recommends a defensive positioning across all asset classes.
This week we present our Portfolio Allocation Summary for May 2023.
This report looks at the relationship between rate risk and credit risk and how it has changed over time. It also makes the case for favoring agency MBS within an underweight allocation to US spread product.
The Fed lifted rates 25 bps yesterday while also signaling that the tightening cycle is near its peak. We discuss the short-run and long-run implications for Treasury yields.